If you’re looking for a Canadian stock with solid fundamentals and promising growth potential, Lightspeed (TSX: LSPD) should be on your radar. As a leading cloud-based commerce platform provider, Lightspeed will likely benefit from the ongoing shift towards omnichannel selling models, making it an attractive option for long-term investors.
Despite facing macro headwinds that have caused the stock to drop roughly 38% year-to-date, Lightspeed continues to demonstrate strong revenue growth. Moreover, its focus on achieving sustainable earnings and a low valuation makes it an attractive option for long-term investors.
With this backdrop, let’s look at three reasons that make Lightspeed stock a Buy now.
Reason #1: Strong Sales Growth Set to Continue
Lightspeed, with its comprehensive solutions – including omnichannel capabilities, point of sale (POS) systems, inventory management, and financial products like Lightspeed Payments and Lightspeed Capital – is likely to benefit from the growing trend towards multi-channel platforms. This will support this technology company’s top-line growth.
Lightspeed will likely see solid demand for its POS and payment solutions as more small and medium-sized businesses (SMBs) adopt digital solutions and modernize their payment systems.
In the first quarter of fiscal 2025, Lightspeed reported impressive 27% revenue growth. This growth reflects increasing adoption of its unified payment and POS solutions. This trend is expected to continue, providing a solid foundation for sustained growth.
A significant highlight is that the company’s gross payments volume surged by 64% year-over-year in Q1 to reach $8.4 billion, as more businesses chose to process payments using Lightspeed Payments. Further, Lightspeed’s payment solutions now comprise 36% of its total transaction volume, signalling significant room for expansion.
In addition to payments, Lightspeed’s financial services, including Lightspeed Capital, are also gaining traction. With the growing adoption of its financial products and increasing payment penetration, the company is well-positioned to continue to deliver strong sales in the coming years.
Reason #2: Closing in on sustainable profitability
Lightspeed is making significant strides toward achieving sustainable profitability. Over the past few quarters, the company has shown consistent improvements, particularly in its adjusted EBITDA, which has increased for four consecutive quarters. Additionally, Lightspeed has managed to reduce its losses.
With a growing revenue base and better cost control, Lightspeed is improving its operating leverage, positioning it for record-adjusted EBITDA in the future. The company’s growing payment penetration and efficiency initiatives also contribute to its profitability goals.
Moreover, Lightspeed focuses on high Gross Transaction Volume (GTV) customers, who are more likely to remain on the platform long-term and adopt multiple Lightspeed services. This focus helps boost average revenue per user (ARPU) and sets the stage for sustainable earnings growth.
Reason #3: Acquisitions and attractive valuation
Acquisitions play a crucial role in Lightspeed’s growth strategy, allowing the company to expand its customer base, improve its product offerings, and strengthen its market position. Lightspeed has a strong history of successfully integrating acquired companies, which bodes well for its prospects.
What makes Lightspeed even more attractive is its current valuation. The stock trades at a forward enterprise value-to-sales (EV/Sales) multiple of 1.1, significantly lower than its historical average. This provides a compelling buying opportunity for investors looking to enter at a multi-year low.
Bottom line
Lightspeed is well-positioned for long-term growth thanks to the increasing adoption of its commerce solutions, improving profitability, and strategic acquisitions. With its low valuation, now could be a great time to consider Lightspeed for your investment portfolio.
